Zarith publishing company has an annual credit sales of RM1,600,000 and a gross profit margin of 35 percent.
a. If the firm wishes to maintain an average collection period of 50-days, what level of account receivable should it carry? (Assume a 365-day year).
b. The inventory turnover for this industry average six times. If all of Zarith's sales are on credit, what average level of inventory should the firm maintain to achieve the same inventory turnover figure as in the industry?